reversionary trust

When might a reversionary trust be used?

A reversionary interest is often found in the “qualified personal residence trust" and the “grantor retained annuity trust," which are popular estate-planning vehicles. In these trusts, the grantor retains the use of the trust property (the grantor retains the use of the residence in the qualified residence trust and retains a fixed annuity amount in the grantor retained annuity trust) for a specified period of years. If the grantor dies during this period, the terms of the trust direct that all or a portion of the trust property will be paid (“revert") to the grantor's estate, either at the grantor's death or at the expiration of the specified term. A reversion might also be included in an inter-vivos trust for the benefit of the grantor (sometimes called a “living trust") if the trust indenture does not direct the disposition of the grantor's property at the grantor's death and the grantor desires that the property pass under his or her will.

Stephen F. Lappert, Partner, Trusts and Estates Department, Carter Ledyard & Milburn LLP, New York, NY